ADP refunds - for $3 each

[doombuggy]

A client had me re-run a contribuiton calculation for them yesterday, and as a result, they fail the ADP test by 0.01%. This causes two HCEs to each get a refund of $3 (plus earnings, of course). Does anyone know if there is a deminimus amount for a refund, like under $10 or something? I told the client I would look into that , otherwise these two guys will get a refund check and can go to Wendys for lunch one day.

Thoughts?

[Tom Poje]

this is one of those points that is possibly arguable.

technically there is no de minimus amount.

under the self correction program, there is a note that says

if the total corrective distribution is less than $50 then you are not required to make it if the cost of processing is more than its worth.

now, does the term 'corrective distribution' refer to failed tests? or does this only refer to someone you paid out and found they had additional money coming?

in other words, a year after the fact I rerun my ADP test and discover I fail by $3. do I get to exercise this option?

if yes, it seems wierd I would have to refund the $3 if I complete my test within a year but after a year I could rely on the self correction program. does exercising this option 'significantly favor' the HCEs? I wouldn't think $3 would.

does your document allow you to use any definition of comp that satisfies 414(s)?

In other words, if you use comp - deferral would that shift numbers enough to pass testing?

[doombuggy]

We tried every trick we knew to get this to pass. There is no passing this test.

I certainly agree that the cost of processing would be more than it's worth. I don't beleive that there are check fees involved in the distributions, however. Since the partiicpant is not required to sign off on the distribuiton, no forms are really required, so that nixes that charge. I will have to calculate the g/l to the $6, which would take a little time.....

[doombuggy]

The client just let me know that there was a non-res alien in the mix, when the plan doesn't allow them to be in it. By taking him out, it made the plan pass.

Thanks anyway - I hope this doesn't happen again, though!